Correlation Between Stepan and EMCOR

Can any of the company-specific risk be diversified away by investing in both Stepan and EMCOR at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Stepan and EMCOR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stepan Company and EMCOR Group, you can compare the effects of market volatilities on Stepan and EMCOR and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Stepan with a short position of EMCOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and EMCOR.

Diversification Opportunities for Stepan and EMCOR

-0.17

Correlation Coefficient

Stepan  EMCOR

Good diversification

The 3 months correlation between Stepan and EMCOR is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group and Stepan is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Stepan Company are associated (or correlated) with EMCOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCOR Group has no effect on the direction of Stepan i.e., Stepan and EMCOR go up and down completely randomly.

Pair Corralation between Stepan and EMCOR

Considering the 90-day investment horizon Stepan Company is expected to under-perform the EMCOR. In addition to that, Stepan is 1.2 times more volatile than EMCOR Group. It trades about -0.08 of its total potential returns per unit of risk. EMCOR Group is currently generating about 0.28 per unit of volatility. If you would invest  45,710  in EMCOR Group on May 11, 2025 and sell it today you would earn a total of  16,112  from holding EMCOR Group or generate 35.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Stepan Company  vs.  EMCOR Group

Stepan Company

Risk-Adjusted Performance

Weakest

Over the last 90 days Stepan Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

EMCOR Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, EMCOR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stepan and EMCOR

The main advantage of trading using opposite Stepan and EMCOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, EMCOR can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in EMCOR will offset losses from the drop in EMCOR's long position.

The idea behind Stepan Company and EMCOR Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.